Microdonations matter now more than ever

by Carol A. DiLuzio, CPA, CGMA, Principal

Posted on November 8, 2017

At 80 million strong, Millennials now make up the largest chunk of the U.S. population. But because they’re often still in school or just beginning careers, they generally don’t have the financial resources to make large charitable gifts. Another fact about Millennials: They use their mobile devices to do everything. What logically follows is that nonprofits hoping to harness the giving potential of this demographic must make it easy for supporters to text microdonations — as small as $1 a pop.

But it’s not just about engaging young people. Traditional fundraising strategies that exclusively target well-heeled donors via phone calls and letters need to evolve to accommodate all kinds of supporters and communication methods. Accepting microdonations ensures that anyone who wants to give to your nonprofit probably can.

What are they, exactly?There’s a saying about microdonations. They’re the amounts you don’t think twice about giving. Whether it’s $5 to a text-to-give campaign or $15-a-month automatic checking account withdrawals, microdonations typically won’t break the average donor’s budget.

Microgiving is likely contributing to a shift in the charitable giving landscape. A Chronicle of Philanthropy survey found that people earning less than $100,000 gave 4.5% more of their income in 2012 than they did in 2006. And the 2017 Giving USA survey reports that donations from individuals rose 7% last year. Patrick M. Rooney of Indiana University’s Lilly Family School of Philanthropy says that recent trends represent “something of a democratization” where growth can be attributed to “donors among the general population,” as opposed to the wealthy.

High net worth donors are still responsible for most charitable dollars spent. But even these prized supporters — solicited by dozens, if not hundreds, of charities every year — welcome opportunities to give small. If you encourage microdonations, your nonprofit is more likely to receive something from big donors. Once you have their support and they get a chance to learn more about your organization, big donors making small gifts could become big donors making major gifts.

What app?The microgiving concept is an old one. Consider the “spare change” collection boxes that have graced supermarket checkouts for decades. Those boxes probably aren’t going anywhere anytime soon, but consider: Online giving increased almost 8% in 2016 over 2015, and 17% of online donations in 2016 were made on a mobile device, according to Blackbaud Institute’s fifth annual Charitable Giving Report. Think of apps such as Spotfund and Google’s One Today, which enable $1 to $3 gifts, as 21st century collection boxes.

Other technological platforms allow supporters to contribute to your nonprofit simply by shopping. These include AmazonSmile, which donates a percentage of purchases to the shopper’s charity of choice and Bstow, which rounds up purchase amounts to the next dollar and donates the “change.” GiveCampus is tailored to the giving preferences of Millennials, with fundraising and volunteer management features. And Facebook allows users to build fundraising pages where their friends can donate directly to a charity without leaving the social media site.

What’s your responsibility?Although technology is changing how donors give, some things never change. That includes your nonprofit’s responsibility to substantiate gifts for income tax purposes. If a microdonation, however small, is made in cash, make sure you provide the donor with a receipt.

You aren’t required to substantiate gifts of less than $250 from donors paying by check, credit card or payroll deduction. But sending a letter of acknowledgment is a great way to show your appreciation, particularly if the volume of smaller donations you receive makes sending personalized thank-you notes difficult.

Give them what they wantThere are many different ways to encourage microgiving to your nonprofit. Although the current focus is largely on online and mobile donations, you should also offer such choices as automated monthly contribution plans. After all, many donors prefer to “gift it and forget it.” To ensure you’re offering supporters the options they want, conduct formal and informal surveys of your base.

To learn more about how our firm can serve your nonprofit organization, please contact me at (302) 254-8240.

The articles in this blog are published with the understanding that the authors are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use.